Mexico's senate approves reforms including 7.5% mining tax

Wednesday, October 30, 2013

Mexico's senate has approved tax reforms which include a 7.5% mining charge.

The reforms, which include changes to income tax, value added tax as well as an overhaul of mining rights, were passed by 73 votes to 50 in a late night vote on Tuesday (Oct 29).

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However, 78 articles were reserved for further debate regarding possible amendments, some of which were due to be carried over into Wednesday's (Oct 30) session. Following senate approval the reforms only need to be enacted by President Enrique Peña Nieto.

As well as the 7.5% tax on mining sales, minus certain deductions, the reforms include a 0.5% tax on gross revenues of gold, silver and platinum mines.

Opponents say the charges will see investment in the sector drop off dramatically, with major producers Grupo México (BMV: GMEXICOB) and Canada's Goldcorp (TSX: G, NYSE: GG) warning they may divert billions overseas.

The government claims the mining industry does not currently pay a fair contribution to the state and has said it will ensure a significant proportion of the proceeds go to mining communities or states.

Mexico is one of the few jurisdictions not to charge a royalty or additional tax on mining production or profits, with companies paying general corporate taxes, profit sharing agreements with workers and per-hectare fees for mining concessions.